As a furnished rental provider, you can choose to declare tour revenues under the micro-BIC regime or under the “Reel Simplifie” which is often better.
Try our free simulator to choose the best tax option in your case.
LMNP: which regime? ‘Réel Simplifié’ or ‘Réel Normal’?
The ‘réel simplifié’ regime applies by law to the taxpayer whose annual pre-tax revenues ranges between €72 600 and €247 000. It can be applied by the preference of the taxpayer when his revenue is below €72 600.
When the revenue exceeds €247 000, it must be declared under the “normal réel” regime and not under the simplified one. In the end, the regime ‘réel simplifié’ is most suitable for owners.
Calculation of taxable profit
In the case of the regime ’réel simplifié’, taxable profits are calculated according to the rules for Industrial and Commercial Benefits.
The income is composed of pre-tax rental income, whether collected or not, as well as the provisions for charges provided by the contract and the additional recipes.
Consequently, your taxable revenue corresponds to the difference between annual revenue and annual charges, plus tax-deductible provisions for depreciation.
The regime ‘réel simplifié’ allows you to deduct the following charges from your furnished rental income:
- Invoices for maintenance and repair: only invoices related to maintenance and repairs may be deducted. Major construction works, reconstruction, extensions or improvements and all expenses related to major building work such as plumbing, roofing, the construction of a bathroom, central heating or elevator cannot be deducted. Yet their depreciation is taken into account.
- Land tax (if the property is registered as an asset)
- Insurance fees (if the property is registered as an asset)
- Management cost
- Fees paid to the accountant
- Litigation expenses in case of procedure with the tenant
- Utilities service and consumption integrated in the rent (electricity, water, telephone, internet)
- Loan interest, increased by application fees, loan guarantee fees and insurance premiums (if the property is registered as an asset).
- Registration fees, notary fees related to the acquisition of the good (if registered as an asset)
- Provision for liabilities (for example, payment risk)
The “réel simplifié” system allows deduction of tax-deductible depreciation provisions
In accounting, tax-deductible provisions for depreciation allows taxpayers to recover the cost of property or assets they’ve “placed in service” as part of their business operations. They generally cannot deduct the full cost of an asset in the year of purchase if it is a capital expenditure, but can instead spread the cost over a number of years in a process known as depreciation.
In the case of renting out a furnished property, we estimate the depreciation of the used asset and add it as a charge to taxable income, reducing net income by the same amount, pushing downward the tax paid on the exercise.
The elements subject to depreciation are listed here.
- Depreciation of plant and equipment (if included in assets)
- Depreciation on equipment and furniture (if included in the assets)
- Depreciation on major construction, reconstruction, extensions or improvement (if included in the asset)
As you can see, depreciation is clearly one of the most important elements of renting. Following the rules can clearly help you save a lot of taxes. It is often through depreciation that many owners avoid paying a lot of taxes. 85% of them pay very little or even zero taxes.
However, it is good to precise that it is an imperative, when offering a furnished rental service, to ask for help in doing the tax return when you are in the regime “Réel Simplifié”. Indeed, one mistake on the cerfa declaration form, or during the calculations can make this regime very burdensome and less profitable and can force you to call upon a professional service for the corrective reports of the previous years, which can be particularly costly.
What are the concrete obligations ?
To declare your revenues when you are under the ‘Réel Simplifié’ regime, you must send a special declaration n° 2031 via a teletransmission system to the corporate tax authority responsible for your property.
This teletransmission of your furnished rental income, when you are under the “Réel Simplifié” regime, must contain the following attachments:
- A simplified balance sheet showing the credits and debts noted at the closure of the exercise attachment n° 2033-A.
- A simplified profit and loss account of the concerned exercise composed of 2 sections (Accounting results and fiscal results)- attachment n° 2033-B.
- A table of tangible assets, a depreciation table and the elements of profit and loss according to the fiscal regime- attachment n° 2033-C.
- A provision statement, derogatory amortizations and reportable deficits- attachment n° 2033-D.
- A table allowing the calculation of the added value produced during the exercise – attachment n° 2033-E.
The benefit is declared, under the control of the tax administration.
The accounting obligations are very limited: you must keep record of income, expenses, and, if necessary, a record of assets.
The advantages and disadvantages
Although the tax return and accounting formalities are more complex, in most cases the real simplified regime allows you to optimize your taxation.
In fact, it is common for the amount of deductible charges and depreciation to exceed 50% of annual revenue.
This is why we offer you our services for your LMNP accounting and your non-professional furnished rental income declarations:
- Support with your declaration
- The tax return and all the additional forms necessary to establish your income tax return are generated by our services.
With our assistance you can declare very easily your rental revenues from furnished property and you save a lot on taxes. Do not hesitate to contact us if you have any tax related question !